Article 49KHB FCC Ponders Revising Several NCE and LPFM Procedures

FCC Ponders Revising Several NCE and LPFM Procedures

by
Matt McCormick and Keenan Adamchak
from CommLawBlog on (#49KHB)

Anyone who has filed an application for a new noncommercial educational (NCE) station or a new Low Power FM (LPFM) station knows that many traps beset the unwary throughout the process. If you fall into one of those traps, your chance of success can be severely injured. On Valentine’s Day, the Federal Communications Commission (“FCC” or the “Commission”) adopted a 50-page Notice of Proposed Rulemaking (NPRM), in which the Commission contemplated removal of some of those traps and simplifying some of the NCE and LPFM new station application procedures.

Here are the highlights:

NCE Applicant Proposals

1. Eliminate the Need for NCE Applications to Revise and Submit Governing Documents. Currently, if a new NCE station application is mutually exclusive (MX) with another application, the FCC chooses the winner through a points process too detailed and arcane to explain here (the NPRM, however, features a reasonably concise explanation for those interested in the nitty gritty). Suffice to say here, it is beneficial if an NCE station applicant can obtain “localism” points by being both “established” and “local” for at least 2 years immediately before filing its application. It is also beneficial if the applicant can obtain media “diversity” points. To do so, neither the applicant nor any “parties” to the application (e.g., the applicant’s officers and directors) can hold an interest in another station whose principal community contour overlaps that of the proposed new station.

In the past, to obtain localism and/or diversity points, the applicant needed to support its claims with governing documents demonstrating the requisite localism and diversity attributes – which in almost all cases compelled the applicant to amend its existing governing documents. Many a hard-fought and expensive NCE MX case turned on whether an applicant’s amended governing documents sufficiently supported the award of localism and diversity points.

In the NPRM, the FCC proposed to drop the localism requirement from an applicant’s governing documents. Instead, the applicant would certify that it will maintain its local status until its new station had been on the air for 4 years. Similarly, both the prevailing applicant awarded diversity points and the parties to that application would be barred from acquiring another station whose principal community contour would overlap that of the new station. The ban would remain in place until the new station had been on the air for 4 years.

2. Establish Uniform Divestiture Pledge Policies. Under the current rules, if a new NCE station applicant wants media diversity points, but either it or a party to its application has interests in a station whose principal community contour overlaps that of the proposed new station, those other interests have to be divested before the filing window closed. Unless, that other station was a fill-in translator, a Class D FM station, or an LPFM station. For those 3 station types, the applicant did not have to shed itself of those other interests until the new station went on the air.

In the NPRM, the FCC proposes to honor divestiture pledges for all types of stations. The pledge would need to be made in the application before the filing deadline, and the winning applicant would need to complete its pledged divestiture before the new station went on the air.

3. Revise Tie-Breaking and Time-Sharing Procedures. Currently, if NCE applicants are tied for the highest points in an MX group, they move on to a tie-breaking round: the applicant with the fewest other stations wins. Then, the applicant with the fewest pending applications wins if 2 or more applicants in the MX group remain tied. However, if a tie still remains and the applicants are unable to work out a settlement, the FCC resorts to mandatory time-sharing in which the remaining applicants split use of the frequency – a thoroughly unsatisfactory result for all involved. If the parties cannot agree on how to split use of the frequency within 90 days, the Commission may resolve the issue through a hearing – which the FCC has never actually done. Instead, these types of MX groups remain in pending status for years until the applicants finally break down and cut a deal.

In the NPRM, the FCC requests proposals to improve the tie-breaking process and the procedures for mandatory time-sharing if applicants remain tied. Additionally, the Commission asks if the existing LPFM mandatory time-sharing procedures should apply to NCE cases.

4. Clarify and Modify the “Holding Period” Rule. In the NPRM, the FCC asks if it should tweak its Holding Period Rule. The rule is intended to ensure that a winning NCE comparative case applicant maintains its technical and non-technical characteristics for at least 4 years after the station goes on the air.

As to non-technical characteristics, the current rule imposes a 4-year prohibition on a winning applicant from divesting its station to an entity that would garner fewer comparative points than the winning applicant. However, the rule does not bar the winning applicant from altering the characteristics it relied upon to obtain the station. For instance, an NCE applicant that won based on media diversity points could subsequently acquire another same-service station in the same area. Thus, the FCC asks whether it should revise the rule to prohibit such changes, and if so, how long the prohibition should be in place.

As to technical characteristics, winning NCE stations are currently subject to a 4-year prohibition on downgrading service to the area on which a winning preference was based. The FCC now asks whether it should allow such stations to drop some first and/or second NCE FM service originally proposed if that loss is offset by first, and separately, combined first and second NCE FM service population gains.

LPFM Applicant Proposals

1. Permit Time-Sharing Agreements Prior to Tentative Selectees Being Designated.

When LPFM applicants are tied for the highest number of points in an MX group, they are permitted to enter into voluntary time-sharing agreements and aggregate their points. For example, if 3 applicants with 3 points each entered into a time-sharing deal, together they could claim 9 points. Still, some confusion exists as to when LPFM applicants can aggregate their points.

In the NPRM, the FCC tentatively proposes to allow point aggregation discussions and agreements at any time before the Media Bureau implements involuntary time-share procedures. Afterwards, the Commission asks if its proposal goes too far and would lead to gamesmanship. Also, it asks: should the number of applicants entering into a particular time-share deal be limited so they cannot “stack the deck”? And what should the FCC do if a time-share participant bags out of putting its station on the air after the share-time construction permits have been granted? Should the Commission open a “mini” application window for the time slot surrendered?

Finally, the FCC asks what procedures should be followed if a time-sharing agreement is dismissed for any reason. Should the tentative selectees get a second chance to put together a voluntary point-aggregating time-share deal or a universal settlement?

NCE and LPFM Applicant Proposals

1. Reclassify Gradual Board Changes as Minor. The FCC’s NCE and LPFM construction permit awards can take a long time to occur. Changes in the governing boards of NCE and LPFM applicants are bound to happen while construction permit applications are pending. Thus, an application may be dismissed because a “major” change in the applicant has occurred while the application was pending (e.g., when a majority of the board membership has changed since the application was filed). Luckily, the FCC routinely grants waivers in such situations. In the NPRM, the FCC proposes to fix the problem by classifying as “minor” all changes in NCE and LPFM governing boards gradually occurring over time with little or no effect on the organization’s mission.

To avoid gamesmanship, the Commission proposes to continue treating the change in the majority of an NCE or LPFM applicant’s board as a “major” – and thus a fatal – change. It asks for comments on the appropriate definitions of “gradual” and “sudden” in this context.

2. Clarify Reasonable Site Assurance Requirements. By filing its initial application, an NCE or LPFM new station applicant makes an implied representation that it has reasonable assurance of its proposed transmitter site’s availability. In the past, it was apparent that some applicants did not understand they were making such a representation or simply ignored the “reasonable assurance” requirement – resulting in extensive pleading battles and the occasional dismissal of erring applicants. To address the matter, the FCC proposes a modification of the NCE and LPFM application forms to require each applicant to certify it has reasonable assurance of its proposed transmitter site’s availability. The Commission also proposes that the applicant retain documentation supporting its certification.

Other Proposals

1. Streamline Construction Permit Tolling Procedures. A new station or modified facilities permittee can pause or “toll” the time given to build the proposed facilities. Tolling is granted for a very limited number of reasons (e.g., a pending post-grant challenge). However, the burden is on the permittee to file the tolling request even if a valid reason to stop the clock is already a matter of record before the Commission. If no tolling request is filed, the time for construction continues to run. In the NPRM, the FCC proposes to identify any NCE or LPFM construction permits that should be tolled because the permit is subject to: (a) administrative or judicial review; or (b) a condition on the commencement of operation that the FCC “has a direct licensing role” in satisfying.

2. Lengthen LPFM Construction Period. LPFM construction permits specify an 18-month construction period. But the FCC routinely gives LPFM permittees an additional 18 months to complete construction upon request. The Commission now proposes to simply extend the initial construction period for LPFM facilities to 3 years.

3. Modify LPFM Transfer and Assignment Restrictions. Presently, the FCC’s rules prohibit the assignment or transfer of an LPFM construction permit altogether. Even a constructed LPFM station can be sold only after it has been licensed and on the air for 3 years, and then the price cannot exceed the depreciated fair market value of the physical equipment and facilities.

In the NPRM, the FCC tentatively concluded that those prohibitions are too restrictive. Thus, the FCC proposes eliminating both the LPFM construction permit divestitures prohibition and the 3-year holding period for LPFM licenses. The Commission proposes instead to allow LPFM divestitures if: (a) the LPFM construction permit was granted at least 18 months before; (b) the price does not exceed the seller’s reasonable and prudent expenses; (c) the buyer satisfies all LPFM eligibility criteria; and (d) the station has been on the air for less than 4 years. Additionally, the buyer is eligible for at least the same number of comparative points awarded to the initial permittee. Finally, if the LPFM station being sold is part of an involuntary time-share group, the buyer must be “locally established” for at least as long as the most recently established local applicant in the tied MX group.

Comments on all of these proposals will be due 60 days after the NPRM or a summary is published in the Federal Register. Reply comments are due 30 days after the comment period ends. We will post an item in CommLawBlog when the Federal Register publication occurs.

Those who have been long awaiting a chance to file for a new NCE or LPFM station can take comfort from the fact the FCC is tweaking the NCE and LPFM permittee selection mechanics. It wouldn’t be going through the exercise if it did not plan – at long last – to open filing windows. The last filing window for new LPFM stations closed in 2013, and in 2010 for new NCE stations.

If you need more details regarding the Commission’s proposals, just let us.

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